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Crude oil storage on stilts in Union County, Kentucky. Photo: Anthony via Flickr.

Waiting for recovery–when will the oil glut disappear?

They’re tired phrases. Oil slump. Oil glut. Rig count down. Oil price dips. It seems as though every time the oil industry hits the news, one of those phrases are used.

But life for those of us who work in the oil and gas industry consists of the here and now, and although the the view of the computer screen reporting the price of WTI crude in real time might strike fear into our hearts from time to time, it’s the day in and day out operations in the field that really define the people in the industry. And while they’re out in the field, their thoughts might still wander back to those tired phrases.

Richard Mason, of Hart Energy, dwells on current operations in the Eagle Ford. Are sunnier days ahead, he asks? “There are signs the bottom is at hand, which is the first step in recovery,” he notes, citing progress in the Austin Chalk and the successful use unconventional techniques there and EOG Resources Inc.’s claim of a 30 to 70 percent recovery uplift on a $1 million investment.

In another recent article for the San Antonio Express-News, Chris Quinn dwells on the Eagle Ford shale boom.

What began with a single well drilled in La Salle County in August 2008 would result in a Texas fossil fuel boom that would burn out almost as quickly as it lit up.

In 2011 the U.S. Energy Information Administration estimated that the Eagle Ford Shale Play held about 50.2 trillion feet of recoverable gas.

But we know how the story goes. The rig counts dropped, and company after company began laying off workers in the heart of Texas, in the Eagle Ford as well as in the fast-growing Permian Basin. Quinn cites a Texas Alliance of Energy Producers report that states 84,000 oil and gas jobs were eliminated in Texas between December 2014 and April 2016. In September 2015, ConocoPhillips reduced its total labor force by 10 percent, heavily affecting its offices in Houston. In East Texas, smaller companies, such as Bronco Oilfield Services cut 52 employees, eliminating a facility in Longview. Schlumberger, Halliburton and Baker Hughes all reported job cuts, too, job cuts that reverberated across every oil field in America, from Alaska to Louisiana.

The good news–yes, there is some good news–things are balancing out. Last week, U.S. Secretary of Energy Ernest Moniz said he sees the global oil market coming into balance. As production across the shale plays, and across the globe, slows, and the oil glut should begin to disappear. However, CNBC reported today that “huge stockpiles of fuel and teeming strategic Chinese crude inventories could send prices on one last, ugly slide lower.” Demand is still lagging behind production, with record stockpiles of gasoline to boot, throwing off the delicate balance across the industry. So we’ll have to sit, hopefully on the rig, and wait a little bit longer for real recovery while the wrinkles hang out.

 

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